| Thu 17 Jun 2010, 7:06 | | AFP - Alexander Forbes Equity Holdings (Proprietary) Limited - Audited Results |
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AFP - Alexander Forbes Equity Holdings (Proprietary) Limited - Audited Results
for the Year Ended 31 March 2010
Alexander Forbes Equity Holdings (Proprietary) Limited
(Incorporated in the Republic of South Africa)
Registration number: 2006/025226/07
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2010
- Credible results in tough markets
- Proactive cost containment
- Profit from operations before non trading items up 8%
- Significant progress with resolving legacy issues
REVIEW OF ACTIVITIES
Total group operating income from continuing operations net of direct expenses
("net revenue") of R4.4 billion is 4% below the R4.7 billion of the previous
year. In the prior year, operating income was stated gross of direct expenses.
For the current year this would amount to R5.0 billion, down 4% on the prior
year of R5.2 billion. The reduction in revenue is mainly as a result of the
stronger average Rand exchange rate against Sterling when translating our UK
revenues. In local currency terms the South African and African businesses
showed a marginal increase in operating income of 2% and the UK businesses
remained in line with the previous year.
Our determined efforts to contain costs in these difficult trading conditions
has been very successful with operating costs increasing by only 1% in the
Africa region and reducing by 4% in the UK businesses(in local currency terms).
Upon translation of the UK expenses to Rand, our overall costs show a reduction
of 8% year-on-year to R3.4 billion, resulting in a consolidated profit from
operations before non trading and capital items ("trading result") from
continuing operations of R1,031 million, which is 8% up on the R957 million in
the previous financial year.
We consider this to be a credible result in the current market conditions; we
recognise that achieving profit growth mainly through cost reduction is not
sustainable and while we continually strive for efficiencies, our future
strategies are largely focused on growing top line revenue in those areas
already identified for strategic growth.
During the year we concluded a number of disposals of certain non-core
operations. These operations are disclosed separately in the financial
statements as discontinued operations and comparative results have been amended
accordingly. These businesses include Chambers Townsend Consultancy (disposed of
at the beginning of the financial year), FIHRST Management Services and our
Brazilian operation TicketSeg Corretora de Seguros S.A. (the latter two
disposals were concluded at year-end). We have classified the COIDlink business
as discontinued as the sale of this business was imminent at the year end and
subsequently concluded on the 12th of April 2010. The HomePlan securitisation
vehicle which matures in July 2010 has also been classified as discontinued in
line with the required accounting standards. The combined contribution of these
discontinued operations to the Group`s result amounts to R14 million or 1 %
(2009: R 18 million or 2%).
As explained in previous years, with the acquisition of the group by the private
equity consortium and the finance structure introduced in the group, our finance
costs will remain substantial for the foreseeable future. During the year under
review, we have also used the current low interest rate environment to further
extend and deepen our interest hedge protection against possible movements in
interest rates in future years. At R841 million, our total finance cost is 4%
down on the previous year. The interest requiring cash servicing amounts to
R359 million for the year.
The resulting profit before tax and after finance costs of R93 million is
significantly better than the loss of R275 million reported in 2009. However,
this forms a very low base and any assessment of growth rates can be somewhat
misleading at this level and even more so when measuring earnings and headline
earnings per share. An assessment of the trading result for the year is
therefore much more meaningful as per the segmental report.
Risk & Insurance Services South Africa
Net revenue from this diverse business increased by 1% to R1,041 million. This
was an acceptable result given the economic recessionary climate which has had a
somewhat delayed impact on the core broking businesses of Risk & Insurance
Services as clients scale down activities or postpone projects. The reduction in
the prime interest rate resulted in a 22% decline in operational interest
earnings. The trading result of R275 million is 2% below that of the previous
year. New business remains key to the success of the business with corporate
and Alexander Forbes Motor and Household Insurance making meaningful
contributions.
Market conditions in the core corporate broking business have been difficult.
However, specialist areas such as Risk Engineering, Metals and Minerals,
Financial Institutions and Professions produced good revenue growth during this
period and continue to differentiate our corporate offering to clients. In
support of our segmentation strategy we have positioned Commercial Solutions as
a separate business. This approach will bring the necessary focus to one of our
strategic growth initiatives in the small and medium enterprise ("SME") market.
The superior product offering accompanied by our diverse skills set will see our
customers benefit as a result of this dedicated market focus.
Guardrisk group remains the largest specialist cell captive insurance provider
in the world, and now also includes the CRE8 business which was fully integrated
during the year. CRE8 now trades as Guardrisk Allied Product and Services. The
Guardrisk group made a substantial contribution to trading profits
notwithstanding a very challenging trading environment. Although not the largest
contributor to Guardrisks` profit, the short-term underwriting profits more than
doubled over the year due to successful interventions and a number of new
schemes. The results are even more credible considering the impact of reducing
interest rates on the investment income of this group. The offshore operations
in Mauritius and Gibraltar reported mixed results for the year with the core
business remaining stable. Guardrisk Insurance`s AA claims paying ability and
Guardrisk Life`s AA- financial strength rating were recently reaffirmed by an
independent rating agency.
Alexander Forbes Compensation Technology (AFCT) offers key value to clients by
expediting recoveries against statutory insurers. The year under review saw
substantial improvements in productivity levels with a 52% improvement in
submissions on behalf of customers. This translated into strong revenue growth
and a substantial improvement in trading margin. AFCT disposed its COIDLink
subsidiary towards the end of the year; this is expected to result in working
capital being released over the course of an 18 month earn out period. Elements
of the sale will contribute to Enterprise Development for AFCT, in line with our
commitment to black economic empowerment.
Alexander Forbes Motor and Household Insurance has experienced a significant
increase in gross written premiums related to the increase in distribution
capacity and the marketing campaign launched last year. New business premium was
substantially above that of the previous year and continues its upward
trajectory. Alexander Forbes Insurance`s management remain committed to the
superior levels of services and claims handling that have seen them
differentiate themselves from other direct insurers in the market. Loss ratios
for the year have been below industry norms - this is key to the sustainability
and success of the business.
Financial Services South Africa
During the year under review, net revenue increased by 3% from the previous year
to R1,276 million, trading results rose 13% to R302 million.
A satisfactory result was achieved by the Retirement Funds division which
featured excellent client retention levels and strong new business wins
particularly in our core administration division. Members under administration
exceed 1.1 million. In a society where the savings culture is relatively poor,
we have continued to extend innovative ways of educating our membership about
the importance of disciplined savings, financial awareness and in particular the
importance of preservation of retirement savings. During the past year we
conducted 1200 education and awareness sessions to members.
Our Retail division, focusing on individual clients, enjoyed continued good new
business cash flows and continues to grow its distribution. New products were
launched during the year further strengthening the platform offered to clients.
Stronger equity markets in the second half of the year also benefitted this
division.
Following the restructure of our Health Management Services division, which now
specialises in ill-health, disability and absenteeism management, we have
experienced a significant turnaround in the Health division. Good new business
wins were secured in the last quarter of the financial year. The core Health
broking and consulting business performed in line with expectations.
Alexander Forbes Life experienced good growth in premium income in the group
risk product although it suffered from a reduction in margins due to competitive
pricing and high claims in some areas. Strategies are being implemented to grow
our Professional Wealth offering (risk cover for the individual market) more
aggressively in the future.
With the Group strategy to focus on core activities, we have discontinued
various businesses during the year. We sold our electronic payment and
switching business, Fihrst Management Services, and sold the broking business
within our Brazilian operation TicketSeg Corretora de Seguros S.A., in which we
had a 50% interest. In addition we are reviewing the strategic options for our
HomePlan Securitisation Vehicle which matures in July 2010 and also classified
this as discontinued operations as required by the accounting standard, IFRS 5.
Investment Solutions South Africa
The Investment Solutions` results reflect the tale of two halves in equity
markets with the first half characterised by overall nervousness and the second
half characterised by growing optimism over the state of investment and capital
markets. Net revenue, net of direct product costs such as fees paid to asset
managers, grew by 1% to R437 million. Trading results were R247m which is 2%
above the prior year. The result for the current year was underpinned by:
- Good retention efforts which allowed the benefits of the positive equity
markets in particular to translate into realisable revenue and profit gains
- Disciplined cost management - operating expenses were down 3% year on year
in spite of significant investment in systems, people and brand
revitalisation.
- Respectable new business flows. We achieved R3,9 billion of new mandates
split between our core multi-management portfolios and investment
administration offering on our platform. The new gains in "platform"
business reflect the benefits of investment in systems to ensure a
competitive offering in this area.
- Substantial market recovery. However, the increase in trading result does
not directly reflect the recovery of markets over this period as might be
expected as a result of the group having substantially hedged the indirect
exposure of income to equity markets in the previous reporting period.
Investment performance was pleasing especially over the 3 year period. Over 3
years, 70% of funds are above benchmark and 97% are above median when compared
against peers. This is in line with Investment Solutions` commitment to clients.
Over a 12 months measurement period, investment performance results are weaker
due to base effects in some of our bigger portfolios being Performer and Pure
Equity that collectively make up over 40% of our assets under management. We are
encouraged by the positive results being generated from the innovative
enhancements to our investment process that were introduced over the past year.
Manager selection remains one of our critical competencies. The enhancement of
our Manager Assessment and Ranking Systems (MARS) supports the dynamic nature of
our investment philosophy and underpin the overall success that has been
delivered to clients thus far.
Afrinet (excluding South Africa)
During the period under review Afrinet focused on increasing operational
efficiencies and cost control. Revenue of R290 million is in line with the
previous year. Total expenditure also remained constant with that of the
previous year.
Afrinet recorded trading results of R71 million, 3% higher than the prior year.
This reflects the tougher operating environment in Africa, evidenced by the
contracting government expenditure, declining interest rates, worsening exchange
rate movements and revising down of GPD growth rates in most of the regions in
which we operate. The South African Development Community operations such as
Namibia, Swaziland and Malawi recorded resilient performance.
Afrinet provides the most comprehensive network in Africa with offices in
Nigeria, Kenya, Tanzania, Uganda, Zambia, Malawi, Mozambique, Botswana, Namibia,
Swaziland and Zimbabwe and correspondents in other key countries. Expansion into
African territories remain core to our growth strategy, as we seek to strengthen
Alexander Forbes as a truly African company with a global footprint.
International Financial Services
The Group`s International operations performed significantly better than in the
prior year with net revenue of GBP111.6 million, down 1% from the prior year,
and trading results of GBP11.7 million, which is GBP3 million or 55% up on the
prior year, despite the unprecedented recessionary environment affecting the
United Kingdom and Europe.
The recession in the United Kingdom continues to impact negatively on the small
and medium sector, Alexander Forbes Financial Services` (AFFS) core target
market. Employee contributions to pensions and expenditure on healthcare and
risk solutions were negatively affected by redundancy programmes, the
curtailment of expenditure by employers and, in some instances, the insolvency
of employers. Client retention remained very high, supported by continued
operational efficiency improvements. In response to declining sales volumes,
AFFS maintained its strong cost control and undertook a further redundancy
programme to reduce its cost base. AFFS continues to focus on building its
renewable income in anticipation of the implementation of the Financial Service
Authorities` Retail Distribution Review, which will have a materially adverse
impact on AFFS`s initial commission revenues from the implementation of new
defined contribution schemes from 2013. The Healthcare division, Alexander
Forbes Trustee Services and Alexander Forbes Channel Islands continued to
perform strongly, with profits in line with the preceding year and expectations.
Overall, these businesses made a trading loss of GBP0.3 million, an improvement
of GBP2.0 million over the previous year.
The actuarial consulting business, Lane Clark & Peacock, continued to
outperform, delivering strong growth across our businesses in the United
Kingdom, Switzerland, Ireland and Belgium. The investments made in the
Netherlands and Swiss asset consulting businesses, as well as the
diversification into non-pensions actuarial consulting in the United Kingdom
performed in line with expectation. Overall, profits grew a very credible 19%
off operating income growth of 6%. This was driven by strong organic growth,
with a number of significant new business wins and continued demand for
actuarial and investment consulting services from the larger corporate market as
clients grappled with the credit crisis, recession and investment market
volatility, coupled with strong internal cost control
Investment Solutions International
Net revenue for the year improved by 22% to GBP2.8 million as investment markets
recovered during the year, increasing assets under management and associated
revenue.
During the year, the Group began consolidating the management of its
international assets under International Investment Solutions. Assets under
management grew to GBP1.4 billion as at 31 March 2010, up from GBP0.8 billion at
the end of the prior year as a result of a combination of these and other new
business flows supplemented by stronger investment markets.
International Investment Solutions` loss from trading results for the year
decreased to GBP0.2 million, from a loss of GBP1.3 million in the prior year. A
focus on new business gains remains the key driver in successfully growing
assets under management to achieve a sustainable level of profitability and
critical mass.
Resolution of historical matter
As disclosed in the prior years, the group has had to continue to deal with
unfortunate historical legacy issues dating back to the mid 1990`s with the
accompanying media criticism. In particular the matter disclosed in previous
years as a contingent liability in our financial statements and referred to as
the "Lifecare" civil dispute or relating to improper use of surpluses in various
retirement funds. Resolving this equitably, we believe is not only in the best
interest of the pensioners concerned, but will also restore the good faith in
our organisation. We are pleased to report that subsequent to the year end, we
resolved the liability in respect of the civil claim by the curators/liquidators
of the affected funds and we are hopeful that the financial relief to the
affected will find its way speedily to all stakeholders in the surplus
apportionment process. The settlement amount has been substantially covered
through insurance and the net financial impact to the group after insurance
recoveries is not expected to exceed R75 million and has been fully provided for
in these financial statements.
Capital requirements
In January 2010, the Financial Services Board issued a notice called the Notice
on the Prescribed Requirements for the Calculation of the Value of Assets,
Liabilities and Capital Adequacy Requirement (CAR) of long-term insurers, 2010.
This notice has been gazetted with effective date 28 February 2010. The notice
sets out additional requirements for the calculation of CAR. The registrar has
granted the industry exemption in order to afford insurers the opportunity to
apply for relaxation of the provisions of the Board Notice. The group has
addressed these provisions and in the case of Investment Solutions has applied
for relaxation in terms of the Notice given that all liabilities of this
business are directly related to asset values and no mortality risk is assumed
by the company, therefore the only risk to be considered is expense and
operating risk. The registrar has acknowledged receipt of the application but
has not responded to the application itself. The company is currently still
within the general exemption period granted by the Registrar.
The year ahead
With a tough trading year behind us, the prospects for the year ahead are
informed by a level of renewed optimism derived from our sense that whilst the
economic recovery will be slow and volatile, it will continue to trend
positively and provide growth opportunities in the markets we serve. In
addition, having had to look deep into our own operations, the cost and
efficiency efforts auger well for all our business.
Our key challenges in pursuing new business growth will be to harness the
innovative energy that has historically been the bedrock of Alexander Forbes. It
is about a clearer sense of purpose, the alignment of effort, and investing for
growth with greater urgency. With this in mind, the budgeting process for the
new financial year is underpinned by four important strategic themes:
- Increasing value for our clients
- Expanding our brand
- Investing and innovating for growth
- Extending our sales and service capacity
Each of these themes will inform and direct our efforts and will form the
foundation of prioritising our investments in the business going forward. We
will measure our success against these themes at every level in the business.
Growth opportunities have been clearly identified. We will continue to leverage
our reputation, strength and differentiating presence in the corporate and
institutional segment since this has traditionally been the foundation of our
business. Furthermore, we wish to drive greater growth in the public sector,
with a desire to develop mutually beneficial relationships with all spheres of
government. The new year will also see a much more intense focus on the retail
sector, with direct offerings of our products and services to individuals.
The allocation of capital will remain a well considered balancing act between
deleveraging (which includes Senior Debt as well as meeting certain servicing
requirements in respect of the High Yield Term Loan), maintaining our regulatory
capital requirements and investing for growth. Additionally we have disposed a
number of non-core businesses which allows us to focus our efforts on our core
businesses and strategic initiatives.
It is our intention that our collective efforts will create enhanced value for
our clients, whilst ensuring that we remain a world-class employer, continuing
to impact positively on society while simultaneously providing superior returns
to our shareholders.
Change in directorate
The past financial year has seen a number of changes to our board. On 8
September 2009, we bade farewell to Mr Andrew Claerhout who was replaced by his
alternate, Ms Lori Hall-Kimm. Mr Jean-Charles Douin was appointed as Ms Hall-
Kimm`s alternate director on the same date. As previously announced Mr Bruce
Campbell resigned as Group Chief Executive on 31 December 2009 and we welcomed
Mr Edward Chr Kieswetter as Group Chief Executive on 4 January 2010. More
recently, Mr Gideon Nkadimeng resigned from the board on 5 May 2010 and was
replaced by Mr Shakes Matiwaza. Mr Kojo Mills, who was Mr Nkadimeng`s
alternate, was accordingly appointed as Mr Matiwaza`s alternate with effect from
the same date. Most recently the board welcomed Mr Barend Petersen as an
independent non-executive director on 10 June 2010. The Board wishes to thank
all those who have served on the board over the past year for their valuable
contribution and welcomes and thanks those who have accepted their new roles.
M S Moloko E Chr Kieswetter
Chairman Group chief executive
15 June 2010
AUDITED ABRIDGED CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2010
31 Mar 31 Mar
2010 2009
Note Rm Rm
s
Continuing operations
Fee and commission income 3 4 726 4 954
Net income from insurance operations 4 309 281
Direct expenses attributable to fee and (586) (578)
commission income
Operating income net of direct expenses 4 449 4 657
Operating expenses (3 418) (3 700)
Profit from operations before non trading 1 031 957
and capital items
Non trading and capital items 5 (179) (500)
Operating profit 852 457
Investment income 80 141
Finance costs 6 (841) (874)
Share of net profit of associates (net of 2 1
income tax)
Profit / (Loss) before taxation 93 (275)
Income tax expense (174) (148)
Loss for the period from continuing (81) (423)
operations
Discontinued operations
Loss on discontinued operations (net of 7 3 10
income tax)
Accumulated loss for the year (78) (413)
Profit / (Loss) attributable to:
Equity holders (129) (464)
Non controlling interests 51 51
(78) (413)
Earnings per share from continuing
operations
Basic loss per share (cents) (35) (126)
Headline loss per share (cents) (30) (34)
Earnings per share from discontinued
operations
Basic loss per share (cents) 1 3
Headline loss per share (cents) 1 3
Earnings per share from continuing and
discontinued operations
Basic loss per share (cents) 8 (34) (123)
Headline loss per share (cents) 8 (29) (31)
AUDITED ABRIDGED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 March 2010
31 Mar 31 Mar
2010 2009
Notes Rm Rm
Loss for the period (78) (413)
Foreign currency translation (142) (108)
differences of foreign operations
Changes in fair value of cash flow (203) (94)
hedges
Portion of fair value hedge recycled 60 (47)
to profit or loss
Tax effect thereon (3) -
Other comprehensive loss for the period (288) (249)
(net of income tax)
Total comprehensive loss for the period (366) (662)
Total comprehensive loss attributable
to:
Equity holders (407) (713)
Non-controlling interests 41 51
Total comprehensive loss for the period (366) (662)
(net of income tax)
AUDITED ABRIDGED STATEMENT OF FINANCIAL POSITION
At 31 March 2010
31 Mar 31 Mar
2010 2009
Notes Rm Rm
Assets
Financial assets held under multi-manager 161 660 134 718
investment contracts
Financial assets of cell captive insurance 7 582 7 498
facilities
Housing loans secured by retirement fund - 750
assets
Property and equipment 205 208
Purchased and developed computer software 166 210
Goodwill 9 5 258 5 335
Intangible assets 1 900 2 091
Investment in associates 10 7 7
Deferred tax assets 158 148
Financial assets 285 365
Insurance receivables 528 330
Trade and other receivables 1 115 1 778
Cash and cash equivalents 2 480 2 495
Assets of disposal group classified as held 944 -
for sale
Total assets 182 288 155 933
Equity and liabilities
Share capital and premium 3 261 3 261
Accumulated loss (777) (636)
Other reserves (313) (47)
Equity holders` funds 2 171 2 578
Minority interests 179 205
Total equity 2 350 2 783
Financial liabilities held under multi- 161 614 134 686
manager investment contracts
Liabilities of cell captive insurance 7 582 7 498
facilities
Securitisation funding for housing loans - 750
Borrowings 5 597 5 857
Employee benefits 158 155
Deferred tax liabilities 615 719
Provisions 650 608
Deferred income 210 263
Insurance payables 1 610 1 379
Trade and other payables 1 074 1 235
Liabilities of disposal group classified as 828 -
held for sale
Total liabilities 179 938 153 150
Total equity and liabilities 182 288 155 933
AUDITED ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2010
31 Mar 31 Mar
2010 2009
Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 1 291 1 110
Net finance costs paid (318) (493)
Cash settlement of cash management and retirement (36) (92)
benefit commitments
Taxation paid (220) (270)
Operating cash flows 717 255
Movement in working capital & insurance balances (113) (709)
Net cash inflow/(outflow) from operating 604 (454)
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net movement in subsidiaries and businesses 45 (13)
disposed/(acquired)
Investment in financial assets (53) (52)
Proceeds from sale of other financial assets 5 58
Proceeds on disposal of property and equipment 58 10
Capital expenditure for the period (95) (102)
Net cash outflow from investing activities (40) (99)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repaid)/advanced (694) (70)
Proceeds on foreign currency swap agreements 374 -
closed out
Payments to non-controlling interest (67) (84)
Net cash outflow from financing activities (387) (154)
CASH FLOWS FROM POLICYHOLDER INVESTMENT CONTRACTS
Premium inflows 30 558 60 718
Investments made net of disinvestments (10 537) (613)
Movement in insurance liabilities (24) 275
Investment withdrawals/ benefit payments (31 884) (56
173)
Net cash inflow/(outflow) from policyholder (11 887) 4 207
investment contracts
Net cash (outflow)/inflow from discontinued 48 (9)
operations
Net movement in cash and cash equivalents (11 662) 3 491
Cash and cash equivalents at beginning of period 32 493 29 113
Foreign subsidiaries translation adjustment (141) (111)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 20 690 32 493
Analysed as follows:
Cash and cash equivalents of discontinued 99 85
operations
Cash and cash equivalents of continued operations 2 480 2 410
Cash held under multimanager investment contracts 17 393 29 256
Cash held under cell captive insurance facilities 718 742
20 690 32 493
AUDITED ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2010
Share Non- Accumu- Ordinary Non- Total
capital distrib lated share- control equity
and utable loss holders` ling
premium reserve equity interes
t
Rm Rm Rm Rm Rm Rm
At 31 March 2008 3 261 200 (170) 3 291 238 3 529
Loss for the - - (464) (464) 51 (413)
period
Other - (249) - (249) - (249)
comprehensive loss
Total - (249) (464) (713) 51 (662)
comprehensive loss
Movement in - 2 (2) - - -
contingency
reserve for short-
term insurance
company
Other movements in - - - - (84) (84)
non-controlling
interest
At 31 March 2009 3 261 (47) (636) 2 578 205 2 783
Loss for the - - (129) (129) 51 (78)
period
Other - (278) - (278) (10) (288)
comprehensive loss
Total - (278) (129) (407) 41 (366)
comprehensive loss
Movement in - 12 (12) - - -
contingency
reserve for short-
term insurance
company
Other movements in - - - - (67) (67)
non-controlling
interest
At 31 March 2010 3 261 (313) (777) 2 171 179 2 350
SEGMENTAL RESULTS
for the year ended 31 March 2010
Income from Trading results of
operations operations
31 Mar Var. 31 31 Mar Var. 31 Mar
Mar
2010 % 2009 2010 % 2009
Africa (Rm)
SA Risk & Insurance 1 041 1% 1 034 275 (2%) 280
Services
SA Financial 1 276 3% 1 236 302 13% 268
Services
Investment Solutions 437 1% 434 247 2% 243
Afrinet (Africa 290 0% 289 71 3% 69
excluding-South
Africa)
Total Africa (Rm) 3 044 2% 2 993 895 4% 860
International (GBPm)
Financial Services 111.6 (1%) 112.6 11.7 34% 8.7
Investment Solutions 2.8 22% 2.3 (0.2) 85% (1.3)
Total International 114.4 0% 114.9 11.5 55% 7.4
(GBPm)
Total International 1 405 (16%) 1 664 136 40% 97
(Rm)
Total Group (Rm) 4 449 (4%) 4 657 1 031 8% 957
Depreciation & Assets
Amortisation
31 Var. 31 31 Mar Var. 31 Mar
Mar Mar
2010 % 2009 2010 % 2009
Africa (Rm)
SA Risk & Insurance 15 13 9 670 9 702
Services
SA Financial 15 14 22 700 16 572
Services
Investment Solutions 2 1 150 517 124 402
Afrinet (Africa 6 6 1 656 1 360
excluding-South
Africa)
Total Africa (Rm) 38 12% 34 184 543 21% 152 036
International (GBPm)
Financial Services 1.4 1.7 102 97
Investment Solutions - - 1 010 763
Total International 1.4 (18%) 1.7 1 112 29% 860
(GBPm)
Total International 18 (47%) 24 12 330 4% 11 863
(Rm)
Unallocated:
Corporate Services 36 36 1 554 2 633
Goodwill - - 5 258 5 335
Consolidation - - (21 397) (15 934)
elimination
Total Group (Rm) 92 (2%) 94 182 288 17% 155 933
NOTES
for the year ended 31 March 2010
1. Basis of preparation
This abridged financial information has been prepared in accordance
with, and complies with, International Financial Reporting Standards
("IFRS"), including IAS 34 (Interim Financial Reporting) and the South
African Companies Act No 61 of 1973, as amended.
The accounting policies applied in the preparation of these results are
consistent with those detailed in the financial statements issued by
Alexander Forbes Equity Holdings (Proprietary) Limited for the year
ended 31 March 2009, except for the changes required by IAS 1
(Presentation of Financial Statements), IFRS 8 (Operating Segments) and
Circular 3/2009 (Headline Earnings).
31 Mar 31 Mar
2010 2009
2. Exchange rates
The income statements and balance
sheets of significant foreign
subsidiaries have been translated to
Rands as follows:
12.3 14.3
Weighted average R:GBP rate
Closing R:GBP rate 11.1 13.8
31 Mar 31 Mar
2010 2009
Rm Rm
3. Fee and commission Income
Brokerage fees and commission income 600 1 005
Fee income from consulting and 3 047 2 854
administration services
Revenue from investment activities 1 000 1 005
Interest income from lending 20 28
operations
Operational interest income 37 50
Other 22 12
4 726 4 954
4. Net income from insurance operations
Insurance premiums earned 3 481 2 955
Less: amounts ceded to reinsurers (2 416) (2 090)
Investment income from insurance 128 176
operations
Less: insurance claims and withdrawals (2 228) (1 760)
Plus: insurance claims and benefits 1 344 1 000
covered by reinsurance contracts
309 281
31 Mar 31 Mar
2010 2009
Rm Rm
5. Non trading and capital items
Non trading:
Professional indemnity insurance cell 26 (11)
Amortisation of intangible assets (191) (190)
arising from business combination
Realised profit on early cancellation - 77
of hedge contracts
Legal and consulting fees on debt (25) (15)
structuring transactions
Movements in provisions relating to 30 (14)
client settlement, claims and
warrantees
Capital items:
Goodwill impairment losses (75) (354)
Capital gain on sale of subsidiary & 56 7
other
Total impairment losses and other (179) (500)
capital items
6. Finance costs
Finance costs requiring servicing:
Senior preference share dividends (at (278) (326)
hedged rate)
HY term loan interest (35) (239)
Other interest costs (46) (55)
Finance costs not serviced:
HY Term loan interest (174) -
Fair value accrual on put and call (59) (89)
option
Debenture interest (172) (151)
Amortisation and impairment of (77) (14)
capitalised borrowing costs
(841) (874)
7. Discontinued operation
The group has discontinued various non core business divisions as
part of its strategic plan. Various businesses have been sold
during the current financial year, with the remaining businesses
having anticipated sales dates. Based on the requirements of IFRS 5
the comparative income statement has been re-presented to show the
discontinued operation separately from continuing operations.
Assets and liabilities held at year end in discontinued operations
have been classified as assets and liabilities of disposal group
held for sale.
8. Calculation of headline loss per
share
8.1 Basic loss per share
Basic loss per share is calculated by dividing the loss for the year
attributable to equity holders by the weighted average number of
ordinary shares in issue during the period.
8.2 Headline loss per share
Headline loss per share is calculated by excluding all impairment
charges and capital gains and losses from the loss attributable to
equity shareholders and dividing the resultant headline earnings by
the weighted average number of ordinary shares in issue during the
period. Headline earnings are defined in Circular 3/2009 issued by
the South African Institute of Chartered Accountants.
31 Mar 31 Mar
2010 Var 2009
Rm % Rm
8.3 Calculation of headline loss per
share
Loss attributable to ordinary (129) 72% (464)
shareholders (IAS 33 earnings)
Adjusting items
- Impairment losses and other capital 19 347
items
- Tax effect on above adjustment - -
Headline attributable loss for the (110) 6% (117)
period
Weighted average number of shares 377 377
(from effective date)
Basic losses per share (cents) (34) 72% (123)
Headline losses per share (cents) (29) 6% (31)
9. Goodwill
The goodwill balance arises primarily from the acquisition of
the Alexander Forbes group effective 26 July 2007. In line with
the relevant accounting policy of the group, goodwill is
assessed annually for impairment in March of each year. An
early impairment review is performed during the year only in
the event that there is a significant indication of impairment
in the value of a specific cash generating unit within the
group. It should be noted that goodwill in respect of cash
generating units where developments may justify an increase in
value, would not result in an increase in carrying value under
the current accounting standards. The following balances were
impaired during the year ended 31 March 2010:
31 Mar 31 Mar
2010 2009
Rm Rm
International financial services - 224
SA Financial Services - 130
Chambers Townsend Consultancy 30 -
Guardrisk Allied Products and 45 -
Services
75 354
10. Associates
Carrying value in balance sheet 7 7
Directors` valuation of associates 24 17
11. Capital expenditure and commitments
Capital expenditure for the period 94 102
Operating lease commitments
Due within one year 175 148
Thereafter 478 357
653 505
Capital expenditure and commitments will be funded from
internal cash resources.
Audit opinion
Our auditors, PricewaterhouseCoopers Inc, have issued their opinion on the
group`s financial statements for the year ended 31 March 2010. A copy of their
unmodified report is available upon request.
Directors:
Independent directors: D Konar, V R Ngalwana, B Petersen
Non-executive directors: A C De Beer (Alternate), J E Douin (Alternate) L Hall-
Kimm, N C Kolbe (Alternate), T Matiwaza, K A Mills (Alternate), M C Ramaphosa,
A Roux, P Schmid, J A van Wyk
Executive directors: M S Moloko (Chairman), E Chr Kieswetter (Group chief
executive), D M Viljoen (Group finance director)
Company secretary & Investor relations: J E Salvado
Registered office:
Alexander Forbes Place, 61 Katherine Street, Sandown, Sandton, 2196
Sponsor:
RAND MERCHANT BANK (A division of FirstRand Bank Limited).
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
Date: 17/06/2010 07:06:01 Produced by the JSE SENS Department.
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